Trust Fund Blues

September 16, 2008
Michael Sheehan

Physician's Money Digest, July15 2004, Volume 11, Issue 13

As interest rates sink, beneficiariesof trusts that pay out income but notprincipal are being caught in a revenuesqueeze. In some states, though, there'srelief for these beleaguered beneficiaries,if they can get their trustees to goalong with them. Over the past fewyears, 14 states have offered trustees theoption to convert a conventional trustinto a total-return unitrust, bringing thenumber of such states to 17. A unitrusteffectively lumps principal and incometogether and pays out a percentage ofthe total, usually around 3% to 5%. In35 states and the District of Columbia,beneficiaries can request that a trusteeuse the "power to adjust," under whichthe trustee can dole out some principalas income. Talk to your financial advisorabout the details.